Wall St. may have lost track of the fact that Motorola (MOT) is really three large business under one roof. Of the $42 million in revenue that the company is likely to have in 2006, about $28 billion will come from the handset business. The company’s telecom network infrastructure business is another $11 billion. Its set-top box division, which competes with Cisco’s (CSCO) Scientific Atlanta group, is the third operating business and should bring in about $3 billion.

The handset business has had an operating margin of about 12%. Based on the company’s recent bad news about price pressure in this part of the company, that figure could clearly drop. The infrastructure business has a margin of about 14%. The set-top box business has a 3% margin.

Motorola has debt that roughly equals cash, so there is very little discount needed from its $43.7 billion market cap ($18 a share).

Nokia, the largest handset company in the world, trades at about 1.5x revenue. Motorola is at about 1x. Nokia is putting its network business together with Siemens, so that is probably priced into its stock. At 1.5x Motorola’s revenue, the handset business would have a value of $42 billion, close the current market value for the whole company.

The infrastructure business has a few large competitors. Alcatel-Lucent (ALU) and Nortel (NT) each have a fair deal of debt for their market caps. Each company trades for about 1x sales.

The other companies that are dominant in the segment are the Nokia/Siemens (NOK)(SI) upcoming joint venture and Ericsson  (ERIC) which is buying Redback (RBAK). Ericsson trades for 2.6x sales. An analyst could argue that Cisco (CSCO) and Juniper (JNPR) are also in closely related businesses and each trades for over 5x sales.

Leaving the companies with the high premium multiples out of the valuation, Motorola’s infrastructure business has comparables in Nortel, Alcatel-Lucent, and Ericsson that range from 1.1x sales in value to 2.6x. At a 1.8x multiple, Motorola infrastructure business would be worth $19.8 billion.

Leaving the set-top box business at Motorola’s own 1x valuation would give that segment a $3 billion valuation. That would bring the valuation of the entire company to $64.8 billion or $26.70 per share, about 50% higher than the stock is now.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.

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